Predicting Stock Prices with Linear Regression: A Complete Machine Learning Practical Project

This article introduces an open-source Apple stock price prediction project based on linear regression, covering the complete workflow from data acquisition, feature engineering, model training to evaluation, suitable for beginners to understand basic time series prediction methods. The project uses Python toolchain (yfinance, scikit-learn, etc.), with the model achieving an R² of 0.96 on the test set and an RMSE of approximately $2.31. It also points out the limitations of linear regression and future improvement directions.

Stock price prediction is a core challenge in the financial field. Although influenced by complex factors, machine learning can provide references through historical patterns. This project takes Apple Inc. (AAPL) as the research object, uses Yahoo Finance historical data to build a linear regression model for predicting the next day's closing price. The goal is to demonstrate the complete workflow from raw data to a runnable prediction system, serving as an introductory guide for machine learning applications in finance.

The project uses the yfinance library to obtain stock data. Features include highest price, lowest price, opening price, and trading volume; the target variable is the next day's closing price (the current day's closing price shifted back by one day). In the preprocessing stage, missing values are handled, and null values generated by shifting are removed to ensure data integrity.

The scikit-learn linear regression algorithm is adopted due to its strong interpretability and fast training speed. When splitting data, shuffle=False is set to maintain the continuity of time series, and the training set and test set are divided in a 70%:30% ratio to ensure the model learns the real market evolution pattern.

Evaluation metrics include MSE, RMSE, and R²: the test set R² reaches 0.96 (explaining 96% of price changes), RMSE is approximately $2.31, training set MSE is 5.12, and test set MSE is 7.45 (normal generalization phenomenon). Matplotlib is used to draw a comparison chart of actual and predicted prices, intuitively showing the model's tracking ability and providing clues for optimization.

The technology stack includes Pandas (data processing), NumPy (numerical calculation), yfinance (data acquisition), scikit-learn (algorithm), and Matplotlib (visualization). The project structure is clear, including the main program app.py, README.md, and requirements.txt. Installation is simple (clone the repository + install dependencies to run).

Limitations of linear regression: weak ability to handle nonlinear relationships and sudden market events. Improvement directions: introduce LSTM to capture long-term dependencies; add technical indicators such as moving averages and RSI; build interactive web applications using Flask/Streamlit; implement real-time data access and dynamic prediction.

This project provides a complete financial prediction case for machine learning beginners, demonstrating the standard workflow, emphasizing the particularity of time series, and providing clear evaluation methods. It is an ideal starting point for learners of quantitative finance/algorithmic trading, and its open-source nature supports continuous community improvement.